A recent New Jersey Star-Ledger story, “Toys R Us Antitrust Settlement Tossed Over $14 million in Attorney Fees,” reports that a federal appeals court held up a $35.5 million consumers’ class action settlement with baby products companies, citing concerns about the distribution of funds and attorneys’ fees.  The U.S. Third Circuit Court of Appeals in Philadelphia reversed a district court judge’s approval of a settlement to resolve claims that retailer Toys R Us Inc., along with baby product manufacturers, conspired to set a price floor for certain products, hurting consumers.

The three-judge panel of the appeals court found that of the $35.5 million, only $3 million was expected to make it to class plaintiffs while $14 million would go to pay attorneys’ fees and expenses.  The rest of the fund – roughly $18.5 million minus administrative expenses – would be reserved for one or more charities designated by the parties.  The appeals court found that when U.S. District Judge Anita Brody in Philadelphia approved the settlement, she was unaware that so much money would be going to charities instead of to class members.

The appeals court’s decision (pdf) focuses on a doctrine known as cy pres, which derives from a French expression meaning “as near as possible.”  Under the doctrine, parties can designate funds that are not claimed in a settlement to charities that promote the interests of class members.  In its decision, the Third Circuit panel did not adopt a bright line rule prohibiting cy pres awards in class action settlements.  But it noted they “should generally represent a small percentage of total settlement funds.”

The appeals court also ruled that courts should consider the total cy pres awards compared to recoveries for class members when determining the amount of attorneys’ fees awarded to class counsel.  The court remanded the case, In Re Baby Products Antitrust Litigation, to the district court judge to reevaluate the fairness of the settlement and the attorneys’ fees.

For more information on the case, visit http://www.babyproductsantitrustsettlement.com/